In South Walton, our business appointments and leisure sojourns are often influenced by rain. Most of us know that when we get the kind of prolonged and heavy rain that hit us recently, that venturing out by car is troublesome. On rainy days, fewer folks find the beach and visitors pack the roads, searching for off-beach entertainment and dining. When the sun is brightly shining, more people populate the beach and the roads are freer for travel.
During summertime, every Floridian is an amateur weatherman by necessity.
From early August through late October, we all keep an eye peeled for disturbances in the Gulf, and then are prepared to run for the hills or hunker down and get hammered. Either way, everyone breathes a sigh of relief on Nov. 1.
Lately, unprecedented variations in patterns of weather have been matched only by the vagaries of volatility in the market.
First, a few weather notes. It snowed in
Yet, I have been living in
These extreme weather changes are exactly the kind of unprecedented volatility we have experienced in the markets since 2008. Lately, market gyrations partly represent a reaction to Federal Reserve Chairman Bernanke’s hints that the Fed may begin tapering quantitative easing, possibly in December, well before the originally announced 2015 timeline. Negative market trends from Asia and
But this is only the latest example. The VIX, or level of volatility, has been rising steadily since 2008. Torrid volatility characterized 2011. In early August of that year, the market dropped 635 points in one day, the largest single day nosedive since 2008. What Andrew Ross Sorkin in the New York Times called “intractable problems” in the EU was part of the volatility equation. Now, a not-so-soft landing in
It is a documented economic tenet that markets overreact to bad news and under-react to good news, so extreme volatility requires investors to prep their portfolios with downside protection, such as dividend paying equities. Dividend payers which have increased their shareholder dividends also serve as a hedge against inflation.
As Chairman Bernanke inevitably edges forward with future QE tapering, markets are likely to remain volatile.
When it rains, it pours.
Margaret R. McDowell, ChFC,, AIF, a syndicated economic columnist, chartered financial consultant and accredited investment fiduciary, is the founder of Arbor Wealth Management, LLC, (850-608-6121~www.arborwealth.net), a fee-only registered investment advisory firm located near Sandestin. Arbor Wealth specializes in portfolio management for clients with $250,000 or more of investable assets.